KOLKATA: Debt restructuring will overshadow the bad loans problems in the December quarter earnings release from banks as it may touch Rs 50,300 crore with a potential to double in the next year as utilities and steel companies fail to execute projects.
Most of these loans, even though restructured, may not turn good since the projects and the viability of the companies concerned itself are under question.
A substantial chunk of these loans are not on the verge of default, but are just unviable, say analysts.
Although banks' slippage ratios for the third quarter are likely to be lower than the previous one due to improved asset monitoring, the ratios will remain high amid slower economic expansion and stress in the global financial sphere.
"What is more concerning than slippages is the huge restructuring pipeline, which, once complete, will lead to a sharp increase in restructured loans for banks over the next 2-3 quarters, ie, by the first quarter of FY13," said Mahrukh Adajania at Standard Chartered Securities.
"The addition of just five accounts could increase restructured loans by 20-60% for banks." Air India, GTL, Bharti Shipyard and the state electricity boards of Haryana, Rajasthan and Uttar Pradesh are the big accounts that are in the process of being restructured.
Banks are expected to report stable net interest margins, or NIMs, and a slight improvement in credit growth, said a report by Kotak Institutional Equities.
"Reported NPAs are likely to remain sequentially stable generally, and in the case of a few banks, surprisingly positive," it said. The troubled Kingfisher Airlines' loan account is estimated to create a hole of about Rs 1,000 crore.
The country's largest lender, State Bank of India, has classified the loan as bad and the bank's slippages, including the Kingfisher's account, could be Rs 8,000 crore, the same as in the last quarter, according to the report.
Standard Chartered forecasts that Punjab National Bank's slippages will rise sharply to Rs 1,600 crore in the third quarter from Rs 1,000 crore in June. Likewise, Bank of Baroda's may rise to 2.2% from 1.3%.
For the largest private lender ICICI Bank, restructured loans could increase by about Rs 500 crore in Q3.
The total restructuring pipeline for ICICI Bank is Rs 1,600 crore, including Rs 650 crore for GTL and Rs 500 crore for 3i infotech, according to Standard Chartered Securities. Both GTL and 3i are being restructured.
indiatimes.com
Most of these loans, even though restructured, may not turn good since the projects and the viability of the companies concerned itself are under question.
A substantial chunk of these loans are not on the verge of default, but are just unviable, say analysts.
Although banks' slippage ratios for the third quarter are likely to be lower than the previous one due to improved asset monitoring, the ratios will remain high amid slower economic expansion and stress in the global financial sphere.
"What is more concerning than slippages is the huge restructuring pipeline, which, once complete, will lead to a sharp increase in restructured loans for banks over the next 2-3 quarters, ie, by the first quarter of FY13," said Mahrukh Adajania at Standard Chartered Securities.
"The addition of just five accounts could increase restructured loans by 20-60% for banks." Air India, GTL, Bharti Shipyard and the state electricity boards of Haryana, Rajasthan and Uttar Pradesh are the big accounts that are in the process of being restructured.
Banks are expected to report stable net interest margins, or NIMs, and a slight improvement in credit growth, said a report by Kotak Institutional Equities.
"Reported NPAs are likely to remain sequentially stable generally, and in the case of a few banks, surprisingly positive," it said. The troubled Kingfisher Airlines' loan account is estimated to create a hole of about Rs 1,000 crore.
The country's largest lender, State Bank of India, has classified the loan as bad and the bank's slippages, including the Kingfisher's account, could be Rs 8,000 crore, the same as in the last quarter, according to the report.
Standard Chartered forecasts that Punjab National Bank's slippages will rise sharply to Rs 1,600 crore in the third quarter from Rs 1,000 crore in June. Likewise, Bank of Baroda's may rise to 2.2% from 1.3%.
For the largest private lender ICICI Bank, restructured loans could increase by about Rs 500 crore in Q3.
The total restructuring pipeline for ICICI Bank is Rs 1,600 crore, including Rs 650 crore for GTL and Rs 500 crore for 3i infotech, according to Standard Chartered Securities. Both GTL and 3i are being restructured.
indiatimes.com
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